Pro forma income statement: Bells manufacturing estimates that the sakes for 2016 financial year will be $2.25 million. No new borrowing was obtained and, therefore, the interest remained unchanged at $24,500. Bell manufacturing is planning on paying cash dividends of $85,000 during 2016. Refer to the financial data in table while answering the following :
A. Compile the pro forma income statement for the year ended december 31, 2016, using the percentage of sales method
B. Compile the pro forma income statement for the year ended december 31, 2016 using fixed and variable cost data
Bell Manufacturing
Income statement for the year ended
Ended december 31,2015
Sales revenue $1,800,000
Less: COGS 1,100,000
Gross profit $700,000
Less: operating expense 450.000
Operating profit $250,000
Less: Interest expense 24,500
Net profit before taxes $225,500
Less: Taxes (40%) 90,000
Net profit after taxes $135,300
Less: cash dividens 85,000
To retained earnings $50,300
Bell Manufacturing
Breakdown of cost and Expense Into fixed and Variable Components
For the year ended December 31, 2015
COGS
Fixed cost $750,000
Variable cost 350,000
Total costs $1,100,000
Operating expenses
Fixed expnse $155,000
Variabl expense $295,000
Total expense $450,000